The United Kingdom formally left the European Union and regained its “sovereignty” on 31 January 2020, thereupon entering a transition period which finally ended on 31 December 2021. British public opinion remains sharply divided about the short-term benefits of Brexit, depending on individual political beliefs and on the media outlets sourced for information. Rather than dwell on these differences, which at times seem irreconcilable, it is far more useful to spend time taking a closer look at the tangible evidence directly in front of us.
The EU-UK Trade and Cooperation Agreement was signed on 24 December 2020 and came into effect on 1 January 2021. The agreement between the UK and what was until recently the world’s largest trading bloc covers trade in goods and services, along with a range of other issues such as air and road transport, fisheries, investment, competition, State aid, tax transparency, and social security coordination. While in theory a “zero-tariff and zero-quota” trade deal, this dispensation applies only to goods that comply with required rules of origin and meet EU product standards. Non-trade barriers for both imports and exports have thus appeared where none existed before. The production methods and supply chains for food exports from the UK now require additional verification by EU authorities. These extra administrative processes have led to a significant drop in food and drink exports to the EU (by 40.9 per cent between February 2020 and February 2021).
From 1 January 2022, British importers will have to pre-notify the authorities when importing most Products of Animal Origin, most Animal By-Products, High Risk Food and Feed not of Animal Origin, and regulated plants and plant products from the EU into the GB, via the Imports of Products, Animals, Food and Feed System (IPAFFA). This means that additional paperwork is now required for previously frictionless trade between with the EU, which remains the UK’s single biggest trading partner, accounting for 42 per cent of all UK exports in 2020.
According to a British Chambers of Commerce press release on 23 December 2021, a survey of 981 businesses revealed that 45 per cent were finding it difficult to adapt to the changes in buying from and selling goods to the EU. Among the reasons cited by respondents were altered VAT requirements, new rules of origin requirements, additional customs procedures and paperwork, staff shortages caused by loss of EU migrant workers, Northern Ireland Protocol rules, and loss of equivalence in areas such as financial services, medical devices, and certification markings.
The Northern Ireland Protocol has also disrupted trade within the UK, introducing customs procedures on goods travelling from GB to NI and requiring goods originating in NI to comply with EU product standards. Protection of the Good Friday Agreement on Ireland has come at a cost, alienating the Unionist community in particular, to protect an all-island economy.
As of November 2021, the UK had concluded 63 trade deals with non-EU countries, most of these being rolled-over or continuity trade agreements, replicating pre-existing deals with the EU. The trade deal with Japan in October 2020 was the first to modify the existing EU trade deal, with minor changes in areas such as services, tariff reductions on meat and fish, and digital and data provisions. The UK-Canada Trade Continuity Agreement in December 2020 was a rollover of the original EU deal, with scope for modification. A new EEA-EFTA States-UK Free Trade Agreement with Norway, Iceland, and Liechtenstein was concluded on 4 June 2021. The UK-Australia Free Trade Agreement, signed on 16 December 2021, was the first free trade deal to be negotiated afresh, while the UK-New Zealand Free Trade Agreement was agreed in principle on 20 October 2021. Both these deals relate to relatively small volumes of trade, involving high transport costs over many thousands of miles.
A free trade deal with the US has yet to be prioritised by President Biden, despite a visit by Prime Minister Boris Johnson in September 2021, leaving the British to target accession to the CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership), a trading bloc of eleven Pacific-rim countries, as well as to seek new deals with the Gulf Co-operation Council, India, Israel, and Mexico, among others. It is worth remembering, however, that there is no such thing as a “free trade deal”, as all international trade comes with political and social strings attached, and the US and India have a reputation as protectionist economies, prioritising domestic interests above all others.
While financial services contributed £168.4 billion (8.6 per cent of total economic output) to the UK economy in 2020, there are uncertainties over the UK’s access to EU financial markets post-Brexit and concerns over the relocation of financial service jobs from the City of London to EU centres. Part of the problem is that agreement on equivalence in regulated financial services, such as insurance, auditing, investment, and exchanges, was left out of the original EU trade agreement. The four-page Joint Declaration on Financial Services Regulatory Cooperation, or UK-EU Memorandum of Understanding, concluded in March 2021, established a Joint Financial Regulatory Forum, as “a platform to facilitate dialogue on financial services issues”, but this remains work in progress.
The EU has always been the leading tourist destination for the British, with Spain topping the list of countries visited. The EU has also been the largest source of visitors to the UK. Tourism contributes £106 billion to the British economy, generating 9 per cent of UK GDP and supporting 2.6 million jobs, many hitherto filled by EU migrant workers. Restrictions on the movement of people means that visa-free travel to EU Schengen zone and EEA countries is restricted to 90 days in any 180-day period. UK travellers will require a passport, less than ten years old and with at least six months remaining on the date of entry to the EU, and will no longer be able to use fast-track lanes provide for EU/EEA/CH citizens at border crossings. A new pre-travel authorisation scheme, the European Travel Information and Authorisation Service (ETIAS), will come into effect in 2022 and require prospective travellers to the EU to fill on an online form, with questions on health, employment, and previous convictions, and then pay seven euros to buy a three-year permit. Health insurance for travellers, once assured by the European Health Insurance Card (EHIC), will be provided by a UK Global Health Insurance Card (GHIC) instead. The EU pet passport has been replaced by an Animal Health Insurance Certificate, valid for four months at a time. Mobile phone providers are now free to re-introduce roaming charges for phone calls and internet use within the EU. And there’s more, which means travellers to the EU will have to do their own research before leaving home.
For longer stays, the automatic right to live and work in the EU has ended, as has the Erasmus student exchange programme. Most professional qualifications are no longer mutually recognised. Certain sectors of the economy in the UK, such as agriculture, hospitality, retail, construction, and freight transport, that previously relied on EU migrant workers, are facing employee shortages, even as the UK now seeks to attract highly-qualified migrants for different reasons, and on a points-based system, instead.
Brexit is a process in evolution and the long-term outcomes await the passage of time. In the short term, we are experiencing some disruption of the previously free movement of people, goods, and services between the EU and the UK, and identifying some small gains from new trade deals that provide a minimal boost to the economy at best. For those who chose to remain impartial and watch from the sidelines, it is worth remembering the adage that “events should speak for themselves”.
Ashis Banerjee